Case No. UTPE 99/ 2009 and RTPE-16/2009. Case: 1. Cine Prakashakula Viniyoga Darula Sangham A Registered Society, rep. by its president Shri G.L. Narasimha Rao, 2. Consumer Guidance Society Vs 1. Hindustan Coca Cola Beverages Pvt. Ltd. rep. by its General Manager, 2. Hindustan Coca Cola Beverages Pvt. Ltd. and INOX Leisure Pvt. Ltd.. Competition Commision of India

Case NumberCase No. UTPE 99/ 2009 and RTPE-16/2009
JudgesDhanendra Kumar, (Chairperson), H.C. Gupta, R. Prasad, P.N. Parashar, Geeta Gouri, Anurag Goel and M.L. Tayal, (Members)
IssueMonopolies and Restrictive Trade Practices Act; Competition Act, 2002 - Sections 2, 3, 3(1), 3(2), 3(4), 4, 4(1), 4(2), 18, 19(1), 19(3), 19(4), 19(5), 19(6), 19(7), 26(1), 26(5), 27 and 66(6); Maharashtra Regional and Town Planning Act, 1969; Consumer Protection Act, 1986; Competition Commission of India (General) Regulations, 2009 - ...
Judgement DateMay 23, 2011
CourtCompetition Commision of India

Order:

  1. Consequent upon the repeal of Monopolies and Restrictive Trade Practices Act, the present case has been received by the Competition Commission of India (hereinafter referred to as "the Commission") from the erstwhile Monopolies and Restrictive Trade Practices Commission (hereinafter referred to as "the MRTPC") on transfer under Section 66(6) of the Competition Act, 2002 (hereinafter referred to as "the Act"). The complaint in the present case was filed before the MRTPC on 01.10.2008 by the Consumer Guidance Society, Vijayawada (hereinafter referred to as "informant") against Hindustan Coca Cola Beverages Pvt. Ltd (hereinafter referred to as "HCCBPL") and INOX Leisure Private Limited (hereinafter referred to as "ILPL") for their alleged restrictive and unfair trade practices.

    2 As per the information, the informant, Consumers' Guidance Society, is a registered voluntary consumers' organization formed by a group of professionals of Vijaywada, with the objective of espousing the cause of consumers' welfare and justice in the state of Andhra Pradesh. The opposite party, HCCBPL, is a registered company and a leading producer of bottled water and soft drinks in India as well as across the globe and opposite party, ILPL, is a company which operates many multiplexes across various locations in India.

    3 The allegations raised by the informant in the present case, in brief, are as under:

    3.1. The opposite parties, HCCBPL and the ILPL have entered into an agreement and in pursuance of that agreement HCCBPL has been supplying its products which, inter-alia, include the package drinking water and soft drinks at an inflated and exorbitant price which is in sharp variance with normal price of same products in open market. Thus, the HCCBPL and ILPL are indulging into discriminatory pricing policy by selling products with same quality, quantity, standard and package at different prices to different buyers' i.e. higher prices from the buyers at ILPL complex and lower prices from the buyers in open market.

    3.2. The HCCBPL has been supplying 500 ml water bottles and 400 ml orange pulp soft drinks to ILPL with printed Maximum Retail price (hereinafter referred to as "MRP") of Rs. 20.00 and Rs. 40.00 respectively, whereas, it is supplying the same products to other sellers in the prevailing market with printed MRP of Rs. 10.00 and Rs. 25.00 respectively. The HCCBPL has been printing inflated MRP on the products supplied to ILPL so as to deceive and induce the consumers to believe that these products are being sold at the MRP fixed by the manufacturer.

    3.3. It has been alleged that the trade practices adopted by HCCBPL imposes unjustified cost on the consumers and at the same time it also stifles competition as ILPL is selling the product of HCCBPL only. Thus, the consumers' right to have access to a variety of goods at a competitive price is infringed by the vertical restrictive trade agreement entered into between HCCBPL and ILPL.

    4 After receiving the complaint the MRTPC sought comments from the HCCBPL and ILPL and after examining the complaint as well as the replies filed by the opposite parties the MRTPC vide its order dated 13.05.2009 directed the Director General (Investigation and Registration) to investigate the matter and submit preliminary investigation report. Before the preliminary investigation report could be submitted the MRTP Act was repealed and the case was transferred to the Commission in terms of Section 66(6) of the Act.

    5 The matter was considered by the Commission in its meeting held on 18.06.2010. After examining the entire material on record the Commission formed an opinion under Section 26(1) of the Act that there exists a prima facie case and referred the matter to the DG for investigation into the matter.

  2. After conducting the investigation the DG submitted his report to the Commission on 25.11.2010.

  3. Findings of the DG Report

    The gist of the DG findings is as follows:

    7.1 For the purpose of investigation the DGT has identified two issues, (i) Whether HCCBPL and ILPL are in a dominant position in their respective relevant market and whether any of the parties has abused its dominant position in the relevant market; (ii) Whether HCCBPL and ILPL have entered into any agreement in contravention of Section 3 of the Act.

    7.2 During the course of investigation into the matter the DG has considered the information and replies submitted by the opposite parties. The information on packaging and pricing details under which the products are sold by the HCCBPL to ILPL and ILPL to the customers were also taken into consideration. Besides, the certified copies of the annual audited accounts of HCCBPL, copies of agreements between HCCBPL and ILPL for the last three years, details of restrictions imposed by police department on bringing outside food material inside the complex of ILPL and other conditions of sale at the said places were also examined. The DG also recorded the statements of Shri Devdas Baliga, National Legal Counsel, HCCBPL and Shri Alok Tandon, Chief Executive Officer, ILPL.

    7.3 The DG has delineated two relevant markets for the purpose of investigation in the matter, one relevant market for HCCBPL and other for ILPL. The relevant market for ILPL has been defined as "market of retail sale of bottled water and cold drinks inside the multiplexes of ILPL", whereas the relevant market for the HCCBPL has been taken as "the market of supply of bottled water and cold drinks to the owners of closed market of multiplexes and to other commercial enterprises where it is treated as the preferred beverage supplier".

    7.4 After analysing the factors set out in Section 19(4) of the Act the DG has come to the conclusion that HCCBPL enjoys complete dominance as a supplier of the relevant product to ILPL by virtue of its agreement dated 01.09.2010 with ILPL which allows it unfettered rights to supply the bottled water and other cold drinks within the multiplexes of ILPL. Further, the agreement confers the status of preferred beverage provider on HCCBPL which forecloses the competition by not allowing the competitors of HCCBPL to enter the relevant market.

    7.5 Further, the DG has concluded that ILPL enjoys complete dominance in the relevant market of sale of beverages within its multiplexes for the following reasons:

    (i) The ILPL does not allow any outside vendor to sell bottled water and soft drinks inside its premises.

    (ii) It enjoys 100% market share in sale of bottled water and cold drinks within its premises as there is entry barrier.

    (iii) On the basis of its size and resources within its premises it enjoys complete economic power and commercial advantage over its competitors and consumers are completely depend on it.

    (iv) Because of exclusive supply agreement with HCCBPL for supply of bottled water and other soft drinks, the consumers have no countervailing power within the premises of ILPL.

    7.6 The DG has come to the conclusion that the Act of HCCBPL in selling relevant products to ILPL at higher MRP is clear cut case of abuse of its dominant position by directly or indirectly imposing unfair and discriminatory pricing in sale of goods and therefore contravenes the provisions of Section 4(2)(a)(ii) of the Act.

    7.7 As per DG report since HCCBPL has been conferred a status of 'preferred beverage provider' by virtue of its agreement with ILPL, it results in complete foreclosure of competition due to marketing entry barrier for the competitors. Therefore, HCCBPL has violated the provisions of Section 4(2)(c) of the Act by indulging into a practice which has resulted in denial of market access to its competitors in the relevant market.

    7.8 The DG has also noted that by giving 'preferred beverage supplier' status to HCCBPL, ILPL has imposed restriction on the marketing of products of other beverage suppliers in its premises and has thus imposed unfair and discriminatory conditions in purchase of goods in violation of provision of Section 4(2)(a)(i) of the Act.

    7.9. The DG has also come to the conclusion that by selling bottled beverages to the cine goers at higher MRP, ILPL is abusing its dominant position by imposing unfair and discriminatory pricing in the sale of goods within its premises in violation of Section 4(2)(a)(ii) of the Act.

    7.10 As per the findings of the DG, ILPL has also denied access of relevant market to the competitors in violation of Section 4(2) (c) of the Act by conferring 'preferred beverage provider' status to the HCCBPL in the agreement.

    7.11 The DG has lastly concluded that both HCCBPL and ILPL have violated the provisions of Section 3(4)(b) and 3(4)(d) read with Section 3(1) of the Act by entering into anti-competitive agreement dated 01.09.2010 which has completely foreclosed the competition within the relevant production market of bottled water and other soft drinks within the premises of multiplexes owned by ILPL by choking the entry for competitors.

  4. The Commission considered the investigation report submitted by DG and decided to send a copy of the investigation report to both the parties. The Commission also directed the informant and the opposite parties to appear for oral hearing, if they so desire. HCCBPL submitted its reply on 21/02/2011. ILPL submitted its reply on 13.01.2011 and additional reply on 21.02.2011. The informant also submitted its comments on 12.01.2011. The counsel for opposite parties also made oral submissions on 22.02.2011 and 23.02.2011.

  5. Reply of HCCBPL to DG Report

    The submissions made by HCCBPL in its reply, in brief, are as follows:

    9.1 It has been submitted by HCCBPL that the DG has based his findings that HCCBPL has contravened the provisions of Section 3 and 4 of the Act essentially on the basis of erroneous premises that, firstly, by entering into an exclusive supply contract with ILPL it has knocked out competition from ILPL multiplexes and secondly, HCCBPL has declared different MR Ps for the same products sold at ILPL...

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